A concern which I sometimes hear new investors express is what if the bank won’t lend me the money? Let’s just think about this because there are probably going to be two different reasons why a bank might not lend you the money.
The very first is, they’re not going to lend you the money because they don’t like you. I am not being harsh about it but if your criteria doesn’t fit their criteria and there’s no mesh and matching, they aren’t going to lend you the money.
This is why it is really important to have a really good mortgage broker who can go through your financial circumstances and make sure that when they apply for a mortgage that they take you to the bank who’s going to accept you.
By the way, if you want a recommendation for a mortgage broker, I’m very happy to recommend my mortgage broker to you. Just drop me an email:
firstname.lastname@example.org and I will put you in touch with my mortgage broker, not a problem at all.
So, think about it. Are they saying they don’t like you?
One of the benefits of having a DIP (Decision In Principle) is that your mortgage broker could go to lenders and actually get them in a relatively short time. It could happen within 24 hours, they’ll just look at your position and they’ll say ‘Yeah, we’ll lend to that person’ and then you can take that DIP in to an estate agent when they want proof of funds and they want to know you’re a credible buyer. So that can be useful.
The second reason why a bank might not lend to you is because they like you, but they don’t like the property. Sometimes this can be very frustrating and aggravating but if you think about it this way it is actually probably a good thing because if the bank are looking over our shoulder making sure that the property that we buy fits their criteria then it’s really a bit of a safety net to stop us buying stuff that is completely unsuitable, frustrating though it may be. I appreciate that is a simplistic view.
It could be that you found a property that is a fantastic refurb opportunity, but because it needs a refurb a buy to let lender won’t lend them it because they want it to be habitable. That could happen. That can be frustrating.
Again, I would suggest that if your mortgage broker has put you to a lender like that then they might not have been the right mortgage broker for you. You need somebody who understands investment and what we are trying to do.
But, by and large, assuming that’s not the case and that wasn’t just a simple mistake on the part of the mortgage broker, if it turns out that the property isn’t one you should be buying then that’s actually a good algorithm, isn’t it? It stops you from making a mistake. So, it may be that there is some kind of defect with the property that you haven’t noticed which gets flagged up on the evaluation.
Or it could be that you’re overpaying. I was advising an investor recently, one of my mentoring clients, and they had been offered properties which were probably worth only half the price that they were being asked to pay for them by a deal packager or a deal sourcer.
Clearly, if they had actually moved forward and they had bought those properties with the mortgage, in this instance they were actually buying them in cash so they were very vulnerable, but in that instance if they’d been buying them with a mortgage that bank would have seen that these properties were horribly overpriced and overvalued and there would have been a down evaluation and my client would have been saved. As it was, I was able to save my client anyway by pointing out that the property values and the prices didn’t actually bare any resemblance.
So, what I am saying is, it’s not necessarily a bad thing if the bank won’t lend you on a particular property. You want to find out why they won’t lend to you. If its simply down to the bias of the valuer and its actually a really good property, that can be immensely frustrating. What can you do then?
Probably, rather than arguing with the bank and arguing that the valuer’s an idiot, which is what we’d all like to do really, the best thing to do is get your mortgage broker to take you to a different lender and start the process from scratch, with the hope that next time with a different valuer and a different bank it will actually go through.
Peter Jones B.Sc FRICS
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